Amazon: The Important Number

April 27, 2012

Short honk: I don’t want to dampen the flames of excitement about Amazon’s financial report. You can get lots of happiness. Just navigate to “Amazon’s Q1 2012: Revenue Up 34 Percent To $13.2B, Net Income Down 35 Percent.” I learned:

Amazon just reported earnings for the first quarter of 2012. Net sales increased 34% to $13.18 billion in the first quarter, compared with $9.86 billion in first quarter 2011. Net income decreased 35% to $130 million in the first quarter, or $0.28 per diluted share, compared with net income of $201 million, or $0.44 per diluted share, in first quarter 2011. The company beat Wall Street expectations; analysts expected a profit of $0.07 per share on revenue of $12.9 billion for the quarter.

I want to capture what I think is the important number. Amazon’s costs continue to rise. The company is in a race to invest and buy market share. But it has to convert these gains to big money because the cost of the infrastructure, the new staff, legal hassles, and “inventing” gizmos are going up and fast.

One of the secrets of online is that investments in technology really do not flatten out. Only more big money makes the online business work. Amazon is in a race against costs. Exciting. Neither Amazon nor Google is immune to the online cost rash.

Stephen E Arnold, April 27, 2012

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